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Tech Industry

Dow takes high road; Nasdaq heads lower

The major stock markets go their separate ways after the government reports that inflation remains subdued.

The major stock markets went their separate ways today after the government reported that inflation remains subdued.

The Nasdaq composite index fell 53.65 to 3,797.41, and the Standard & Poor's 500 index rose 1.10 to 1,470.54.

The Dow Jones industrial average rose 66.11 to close at 10,687.95 led by Alcoa.

The Labor Department reported that the consumer price index edged up 0.1 percent in May. The core rate, which does not include volatile food and energy components, gained 0.2 percent. Some investors concluded that the benign report makes it less likely that the Federal Reserve will hike interest rates.

In addition, the so-called Beige Book report released by the Federal Reserve indicated a slightly different take on the state of the economy. The report, a regular anecdotal account on the regional economies around the country, found that while solid economic growth continues in most areas, almost all of the 12 federal districts reported a "slowing" in the pace of growth and a "worsening" increase in pricing pressure.

"I think the Fed will be on hold for June," said Mickey Levy, chief economist at Banc of America Securities. "There are clear signs that the economy is slowing down."

Economist Peter Kretzmer of Banc of America says the slowed economy will not "turn into a recession. Businesses are responding efficiently by slowing down production and reducing the number of hours worked," he said.

Yet some believe the inevitable slowdown will hurt corporate profits. "The economy is going to slow down, and that will cause earnings growth to decelerate," said Richard Cripps, a market strategist at Legg Mason.

"There are several cross currents in the market," said Cripps, adding that as the economy progresses, rising oil, commodity and labor costs, along with a weaker dollar, will each put a drag on overall growth.

Among widely held tech shares, Intel closed down $5.06 at $126.44, and Microsoft gained $2.63 to $70.50 as investors reacted to yesterday's positive developments in the antitrust trial.

The CNET tech index lost 31.98 to close at 2,806.04. Losers edged out winners, with 68 of the 98 stocks in the index falling, 26 rising and four remaining unchanged.

Of the 18 sectors tracked, distributors and Internet e-tailers fell about 4 percent each. PC software makers and Internet service companies gained about 2 percent each.

The initial public offering of Rediff.com, an Internet company based in India, was the biggest percentage gainer on the Nasdaq. The shares jumped $7.31, or 61 percent, to $19.31. Volume topped 6 million shares.

Micros Systems, a maker of point-of-sale computer systems for the restaurant and hotel industry, took a big hit on the Nasdaq after announcing that earnings and revenue will not meet Wall Street expectations. The shares fell $7.19, or 28 percent, to $18.44 on volume of 4.4 million shares, about 22 times the stock's average daily volume.

Investors also bludgeoned shares of Visual Networks, which fell $18.38, or nearly 34 percent, to $36.25 on a volume of 16.7 million shares, more than 46 times the stock's average daily volume.

Among members of the CNET tech index, Qualcomm fell $10.88, or 13 percent, to $70.50 after an analyst cut his earnings forecasts for fiscal years 2000 and 2001. Volume topped 41 million shares, making Qualcomm the most actively traded stock on the Nasdaq.

VoiceStream Wireless rose $10.13 to $135.88. The company announced yesterday that it will sell a business unit to Xircom for about $52 million. Xircom shares rose $1.78 to $47.78.

The Philadelphia semiconductor index fell 50.40, or 4 percent, to 1,120.13, led by chipset designer Rambus. The volatile stock lost $18.75 to close at $229.81.

TiVo shares jumped $12.23, or about 57 percent, to $33.80 on a volume of 7.8 million shares, more than 19 times the stock's daily volume. America Online forged a tighter relationship with TiVo, a company whose technology lets TV viewers customize their program lineups, in an effort to boost features for its upcoming interactive TV services. AOL closed up $1 at $52.63.